The market approach is based on a straightforward premise: A company’s value can be derived from the prices others pay for similar businesses. But, in practice, this technique isn’t nearly so straightforward. Here are answers to some frequently asked questions about this approach. How does it work? The market approach estimates the value of a business by comparing it to other companies or business interests that have been sold or are actively traded. These reference points — commonly called guideline transactions or “comparables” — provide pricing data that can be applied, with appropriate adjustments, to the subject company. Of course, the goal isn’t to find an exact match. Instead, valuation professionals look for companies that are reasonably comparable in terms of industry, size, risk and other operating characteristics. When...